Kiddie Care: Dependent HC coverage extends to age 26
Tuesday, 15 June 2010

By Karen Kroll

With the passage of the Patient Protection and Affordable Care Act, employers that offer health care coverage for dependents now are required to make the coverage available to employees' children through the year in which they turn 26. This requirement applies to all group health plans, including those that existed before the law was signed. That means plans can't be grandfathered in and ignore this new requirement.

The goal behind the legislation was to cut the rate of uninsured young adults. According to information from the Department of Labor, nearly one in three 20-somethings lacks insurance. Many lose coverage under their parents' insurance once they leave school, yet find themselves working at entry-level or part-time jobs that don't offer health insurance benefits.

On May 10, the Internal Revenue Service (IRS), Department of Labor (DOL), and Health and Human Services (HHS) jointly issued interim final regulations on this section of the Act.

Some of the legislation's fine points:

    - Coverage starts with plan years beginning on or after September 23, 2010.
    - The coverage extends to both married and unmarried children of employees, up to age 26. The kids don't need to live with their parents, be a dependent on their tax return, or be students.
    - Plans can't offer differing benefits or terms based on the adult child's age.
    - The adult children are included in their parents' family policy; they don't have to purchase their own plan.
    - The plans must provide the children who qualify an enrollment window of at least 30 days.
    - Employees can pay the premiums for their adult children with pre-tax income through an employer's cafeteria plan, if one is offered.
    - Both the employer's and employee's share of the health premium are excluded from income

One caveat to these requirements: plans that existed before March 23, 2010 can exclude adult children who are able to enroll in an employer-sponsored health plan (say, from the child's own job), unless it is a parent's group health plan. However, this exemption ends with plan years starting on January 1, 2014

While health care costs are top of mind with most finance execs, this change doesn't appear to be generating undue worry. Of the companies responding to a recent survey by Hewitt Associates, 44 percent expect a cost increase of less than two percent, while eleven percent expect a jump of two to five percent. The remaining respondents hadn't crunched the numbers. Overall, employers will probably end up insuring five to 10 percent more children than they currently do, Hewitt estimates.

For employers with 5,000-plus employees, the additional annual costs should range from $350,000 to $720,000 for both premiums and claims, the report noted.

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